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Viewpoints from AAM - Navigating the New High Landscape
December, historically the best month to own equities, has begun with a whimper with the S&P 500 closing at a loss each of the first four days of the month. If you include the last trading day of November, that makes five days in a row of red-filled screens for a total loss of 1.23% for the S&P 500. In the grand scheme of things that is a pretty small loss but it already has pundits dismissing the chances of a "Santa Claus Rally" and others saying the recent new market high of 1807.23 for the S&P 500 reached on November 27 might be its last.
Waiting on Weakness?
On Tuesday, March 5, The Dow Jones Industrial Average (DJIA) set a new record close at a level of 14,253.8 (old record of 14,164.5 was set on 10/09/07). Since then it has gone on to set four more consecutive record-closing highs. The S&P 500, at a closing level of 1556.2 on 3/11/13, is still about nine points shy of its record high of 1565.2 (also set on 10/09/07), but it is up seven days in a row and the odds of that occurring are about 1.17%.
Dividend Growth Continues to Impress
The S&P 500 posted a very solid price appreciation of 5.14% (total return of 5.18%) for the month of January which marks its best January since logging a total return of 6.25% in January 1997 (16 years). However, it does pale in comparison to the best January of the last 50 years which saw the S&P 500 return 13.47% in January 1987. Perhaps equally noteworthy, but clearly not garnering as many headlines, is the continued impressive growth of dividends.
We are now about 63% (316 of the 500 S&P 500 companies have reported) of the way into the third quarter earnings season and the popular opinion seems to be that the earnings are disappointing, that this current earnings cycle has peaked and that earnings going forward will fall sharply (earnings cliff). In a nutshell, we don't believe that this is the case and will begin with the former, that the current crop of earnings reports are disappointing.
To IPO or Not to IPO?
With the recent initial public offering (IPO) of Facebook stock, the IPO process is once again making headlines and this raises many questions such as, Is the process fair? Is the process flawed? Should retail investors look to get involved? Pretty simple questions but the answers, if there are any, are not.
Market Gut Check Time, Again
Our research of the last 50 years shows 3% pullbacks occur on average four times a year. So, clearly pullbacks are commonplace during a normal bull market; however, every time they occur they still set investor emotions on edge and test their resolve. At times like this we like to try and decipher what drove the selloff and try to resolve if we think it is just a normal correction or the beginning of a longer trend down and possibly the start of a new bear market.
Flight 2012, Cleared to Hold?
Commercial air travel can be pretty frustrating these days, but nothing compares to the call from the cockpit as you approach your destination that the flight is entering holding. Immediately many questions enter travelers minds including: Why? How long? Where will we land? Given the S&P 500 essentially experienced a holding pattern in 2011, many investors must be asking themselves similar questions right now. Specifically the S&P lost .04 points last year as it began 2011 at 1257.64 and ended the year at 1257.60.
Economic Perception or Reality?
October is on track to post the best monthly S&P gain of this current recovery, the first double-digit monthly gain since December 1991 and the best October gain since 1974. Though we felt the equity markets were overdue for a bounce we do feel we are now ripe for a bit of consolidation before they move higher. We think as perceptions begin to align a bit more with reality that the S&P 500 should be able to move towards the April highs We recommend investors focus on the themes of quality dividends, quality growth and quality balance sheets that we have been highlighting for quite some time.
Dividends: Paid To Wait and Poised to Rally
There are myriad clichs that capital market participants and commentators like to call on from time-to-time to help soothe the pain or illustrate the potential for gain. One that we believe applies on almost any given day concerning dividend paying stocks is, paid to wait. However, there are certain times, like now, when we think we can add the addendum, and poised to rally. We have been discussing for quite some time that we thought the U.S. equity markets were attractive based on current valuations and earnings growth (both current and projected), and that is still the case.
Bull Run Done?
To put it mildly, the equity markets have been extremely weak and extremely volatile over the last three weeks. We expected some weakness into the summer. However, the levels we have seen surprised us somewhat given the vast majority of market moving events came as no surprise and were, we believed, priced into the market. Regardless, we do believe, despite the magnitude of the markets movements, that we are still in a bull market. That isnt to say we go straight up from here but we do think we have put in a summer low.
Second Half Equity Market Rally?
We only have a few trading hours left in the 1st half of 2011 and, barring any late day meltdowns, we should end up solidly in the black as the S&P 500 is currently up 5.85% (includes re-invested dividends). On an annualized basis, this equates to 12.14% which is below the 15 ? 20% we predicted at the beginning of the year. However, as we have reiterated many times before, equity returns never come in uniform fashion, and we still are holding to our prediction as we expect, a better 2nd half than 1st half, in our opinion.
12 results found.